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May 26, 2005|
Frontier Airlines Reports Fiscal Year 2005 Results
DENVER (May 26, 2005) – Frontier Airlines, Inc. (Nasdaq: FRNT) today reported a net loss of $23.4 million, or $0.66 per diluted common share, for its fiscal year ended March 31, 2005. This compares to net income of $12.6 million, or $0.36 per diluted common share for the previous fiscal year. The Company’s fiscal year 2005 net loss included the following items before the effect of income taxes: a write down of $5.1 million of the carrying value of Boeing rotable spare parts which was offset by an unrealized gain on fuel hedges of $2.8 million. These items, net of income taxes, increased the Company’s net loss by $0.04 per diluted share. Included in the Company’s net income for the prior fiscal year ended March 31, 2004 were the following items before the effect of profit sharing and income taxes: $15.0 million of compensation received under the Appropriations Act offset by the write-off of deferred loan costs of $9.8 million associated with the prepayment of all of the government guaranteed loan; a charge for Boeing aircraft and facility lease exit costs of $5.4 million; a loss of $1.8 million on the sale of one Airbus aircraft in a sale-leaseback transaction and from the sale of a spare engine; a write down of $3.6 million of the carrying value of spare engines and rotable parts that support the Boeing 737-300 aircraft; and $1.2 million of flight crew training expenses related to the start-up of our new Frontier JetExpress regional jet relationship with Horizon. These items, net of income taxes and profit sharing, reduced net income by $0.12 per diluted share.
For the airline’s fiscal fourth quarter ended March 31, 2005, the airline reported a net loss of $3.7 million, or $0.10 per diluted common share, compared to a net loss of $5.8 million, or $0.16 per diluted common share, for the same period last year. The fiscal fourth quarter 2005 results, on a pre-tax basis, includes a $2.4 million unrealized fuel derivative gain and a $0.4 million gain from the sale of spare parts and inventory. These items, net of income taxes, reduced the Company’s net loss by $.05 per diluted share.
Chief Executive Officer’s Comments
Frontier President and CEO Jeff Potter said, “While we are disappointed with the losses in our fourth fiscal quarter, we are encouraged by some positive trends which have surfaced this quarter. For the quarter, our mainline cost per available seat mile (CASM), excluding fuel, declined by 1.5 percent on a year-over-year basis, our fourth consecutive quarter of year-over-year CASM decline. In addition, we made great progress with our mainline revenue per available seat mile (RASM) which increased 4.8 percent this quarter, reversing last quarter’s decline. The strength in RASM, a trend we believe will continue into the foreseeable future, was fueled by two consecutive months of load factor increases--a direct reflection of the consumer response to our product and our customer service.
“With mainline costs excluding fuel declining, and unit revenues increasing, we are certainly pleased with some of the underlying fundamentals at the close of our fiscal year 2005. However, there are two critical industry factors for which we do not anticipate a near-term solution--low fares due to overcapacity and historically high fuel costs. Those two issues, which correlate directly to the losses we sustained in fiscal year 2005, continue to temper our enthusiasm of the significant strides we make as an airline.
“We approach fiscal year 2006 with cautious optimism and we are hopeful that our plan based on current market conditions, in conjunction with the tireless efforts of our exceptional employees and the continued growth of our load factors, will return us to profitability in the new fiscal year.”
Fourth Quarter Operating Highlights
Mainline passenger revenue increased 22.0 percent as mainline revenue passenger miles (RPMs) grew at a rate of 22.0 percent during the fiscal fourth quarter, while mainline capacity growth as measured by mainline available seat miles (ASMs) increased 16.0 percent from the same quarter last year. As a result, the airline’s mainline load factor was 73.6 percent for its fiscal fourth quarter of 2005, 3.5 load factor points greater than the airline’s mainline load factor of 70.1 percent during the same quarter last year. The airline’s mainline breakeven load factor, excluding special items, for the fiscal fourth quarter 2005 increased 5.3 load factor points from 70.8 percent to 76.1 percent.
During the fiscal fourth quarter 2005, the airline’s mainline passenger revenue per available seat mile (RASM) increased 4.8 percent to 8.46 cents from the same quarter last year. The increase in mainline RASM was due to the combination of a .4 percent mainline yield per RPM decrease on a year-over-year basis and the 3.5 point load factor increase. Mainline average length of haul increased 5.1 percent on a year-over-year basis.
Mainline fuel cost per gallon during the quarter, excluding an unrealized derivative gain of $2.4 million (.07 cents per gallon on fuel hedge derivatives), but including taxes and delivery charges, increased 30.8 percent to $1.53 compared to $1.17 for the same period last year. Mainline CASM, excluding fuel decreased 1.5 percent to 6.68 cents from the same period last year, when CASM excluding fuel was 6.78 cents.
Senior Vice President and Chief Financial Officer Paul Tate discussed the airline’s year-over-year unit cost comparatives stating, “Our fiscal fourth quarter generated continued improvement in our mainline CASM excluding fuel, despite $1.5 million in costs directly associated with the February 2005 conversion to Sabre for our reservations and customer service technology platform. Mainline CASM excluding fuel was also adversely affected by over $900,000 in Boeing aircraft return costs.”
The airline’s current unrestricted cash (including short-term investments), and working capital position as of March 31, 2005 was $174.8 million and $41.7 million, respectively. This compares to the company’s unrestricted cash (including short-term investments) and working capital position for the same period last year of $190.6 million and $88.1 million, respectively.
The airline’s fleet in service on March 31, 2005 consisted of 14 owned Airbus A319 and A318 aircraft, 30 leased Airbus A319 and A318 aircraft and three leased Boeing 737 aircraft. Given the current yield environment combined with on- going high fuel prices, the company elected to accelerate its transition to an all Airbus fleet by approximately four months to April 11, 2005. As a result, the company discontinued operation of its last three Boeing aircraft between two and 14 months prior to the original lease return dates. During the fiscal first quarter 2006, the Company expects to incur a $3.1 million (pretax) charge for the early retirement of these three Boeing aircraft.
Year End Operating and Financial Highlights
The airline’s mainline passenger revenues during its fiscal year 2005 increased 18.9 percent to $731.8 million from $615.4 million for the prior fiscal year. The airline’s mainline capacity, as measured by ASMs, increased 27.4 percent during fiscal year 2005. During fiscal year 2005, the airline's mainline break-even load factor, excluding special items, increased 6.8 points to 74.8 percent. The airline’s average fare during its fiscal year 2005 decreased 1.9 percent to $102 from $104 from the prior fiscal year. The airline's mainline passenger RASM for fiscal year 2005 decreased 6.9 percent to 7.97 cents from 8.56 cents for fiscal year 2004.
Mainline CASM for the fiscal year 2005 increased to 8.42 cents from 8.41 cents for fiscal year 2004. Mainline CASM excluding the airline's fuel costs decreased 7.4 percent to 6.39 cents during fiscal year 2005, compared to 6.89 cents during fiscal year 2004. During fiscal year 2005, the average cost per gallon of fuel excluding an unrealized derivative gain of $2.8 million was $1.43, a 37.5 percent increase from the last fiscal year. Daily aircraft utilization for fiscal year 2005 averaged 11.1 hours, an increase of 6.7 percent from fiscal year 2004.
Business developments during the quarter included:
Given the continuing lack of relief from extremely high fuel prices in the current quarter, and an April snow storm in Denver that caused the cancellation of almost a full day of service, the Company expects to post a loss for the first quarter of fiscal 2006 in the range of its fourth quarter fiscal 2005 loss, excluding special items.
Potter concluded, “I want to thank each of our employees for their tireless efforts over the past year, during some of the most challenging conditions our industry and our company have seen. We pushed our growth this past year to extraordinary limits and our employees responded by meeting the demand with outstanding customer service and a smile for each of our customers. Our increasing load factors are a direct result of their continued dedication to great customer service and to making Frontier a better airline with each interaction.”
Senior leadership will host a conference call to discuss Frontier’s quarterly and annual results on May 27, 2005 at 9:00 a.m. Mountain Daylight Time. The call is available via the World Wide Web on the airline’s Web site at www.frontierairlines.com or using the following URL: http://www.vcall.com/CEPage.asp?ID=92158.
Currently in its 11th year of operations, Denver-based Frontier Airlines is the second largest jet service carrier at Denver International Airport employing approximately 4,550 aviation professionals. At an average age of less than two years, Frontier’s fleet of 46 aircraft became one of the youngest fleets in the industry upon completion of a transition to “all-Airbus” in April of 2005. Frontier, in conjunction with Frontier JetExpress operated by Horizon Air, operates routes linking our Denver hub to 45 destinations in 25 states spanning the nation from coast-to-coast and to five cities in Mexico. Frontier's maintenance and engineering department has received the Federal Aviation Administration's highest award, the Diamond Certificate of Excellence, in recognition of 100 percent of its maintenance and engineering employees completing advanced aircraft maintenance training programs, for six consecutive years. In July 2004 Frontier ranked as one of the "Top 10 Domestic Airlines” as determined by readers of Travel & Leisure magazine. Frontier provides capacity information and other operating statistics on its Web site, which may be viewed at www.frontierairlines.com.
Legal Notice Regarding Forward-Looking Statements
Statements contained in this press release that are not historical facts may be considered forward-looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from these forward looking statements. Many of these risks and uncertainties cannot be predicted with accuracy and some might not even be anticipated. Some of the factors that could significantly impact the forward-looking statements in this press release include, but are not limited to: further downward pressure on airfares due to competition, overcapacity, demand or other factors; continuing high fuel costs and the inability to recover these higher fuel costs in airfares; unanticipated decreases in the volume of passenger traffic due to terrorist acts or additional incidents that could cause the public to question the safety and/or efficiency of air travel; the inability to secure adequate gate facilities at Denver International Airport and at other airports where Frontier operates; weather, maintenance or other operational disruptions; air traffic control-related difficulties; the impact of labor issues; actions of the federal and local governments; changes in the government’s policy regarding relief or assistance to the airline industry; the stability of the U.S. economy and the economic environment of the airline industry; and other factors detailed in the Company’s public filings with the Securities and Exchange Commission. Any forward-looking statement is qualified by reference to these risks and factors. These risks and factors are not exclusive, and the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release. Additional information regarding these and other factors may be contained in the Company’s SEC filings, including without limitation, the Company’s Form 10-K for its fiscal year ended March 31, 2004. The Company’s filings are available from the Securities and Exchange Commission or may be obtained through the Company’s website, www.frontierairlines.com.
-Financial Tables To Follow-
FRONTIER AIRLINES, INC.
SELECTED BALANCE SHEET DATA
FRONTIER AIRLINES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREEMONTHS AND YEAR ENDED MARCH 31, 2005 AND 2004
FRONTIER AIRLINES, INC.
COMPARATIVE OPERATING STATISTICS
Amounts included in other revenues for Mesa for the three months and years ended March 31, 2005 and 2004 were as follows:
Mesa’s revenue passenger miles (RPMs) and available seat miles (ASMs) for the three months and years ended March 31, 2005 and 2004 were as follows: